Private credit means different things to different funds. Asset-backed private credit is the most conservative end of the spectrum, secured against real, identifiable loan portfolios. Here is what makes it different.

Private credit, in one sentence

Private credit is lending that takes place outside the public bond market. A fund (or institutional investor) lends directly to a business, and the business agrees to pay it back over time with interest. There is no exchange, no quoted price, no rating agency. The loan is held to maturity and the interest income flows back to investors. The IMF estimates the global private credit market at over US$2.1 trillion as at 20241, with Australia among the fastest-growing developed markets.

Within private credit, there is a wide spectrum. At one end sits highly geared loans to private equity businesses. Asset-backed private credit sits at the more conservative end, secured against an identifiable, segregated pool of loans. The Bank for International Settlements describes asset-backed lending as the most structurally protected segment of the broader private credit universe2.

What "asset-backed" actually means

In an asset-backed structure, the lender is not just relying on the borrower's promise to pay. The loan is secured against a specific pool of assets. If anything goes wrong, the lender has a legal right to those assets ahead of every other creditor, under the Personal Property Securities Act 20093.

For the Eldium Income Fund, the underlying assets are the loan portfolios of non-bank lenders, things like invoice receivables, consumer loans, SME finance, and high-net-worth lending. The Fund is not lending against the lender's brand or future earnings. It is lending against the cashflows of a diversified loan book. The RBA's Financial Stability Review tracks this segment under "non-bank lending"4, and notes that asset-backed structures provide stronger investor protection than direct corporate lending.

Why structure matters more than rate

Two funds can quote similar yields and have entirely different risk profiles. The difference sits in the structure.

  • Seniority. Senior secured means first to receive, last to lose. Subordinated debt or equity sits beneath. Asset-backed private credit funds are senior to the originator's own equity in their facility.
  • Security. First-ranking security over a specific asset pool means the Fund can recover those assets directly in a default scenario, without competing with other creditors.
  • Bankruptcy-remote vehicles. Each facility sits inside its own special-purpose vehicle (SPV). If the underlying originator becomes insolvent, the Fund's claim on the SPV's assets is unaffected. Basel II's securitisation framework codifies the same principle that has governed bank warehouse lending for two decades5.
  • Covenant triggers. Pre-agreed performance thresholds (e.g. utilisation, loss rates) automatically trigger lock-up, cash sweep or default provisions. The lender has rights long before things become critical. See First-Loss Capital Explained for how the layered protection works.

Where the risks actually sit

No investment is risk-free. ASIC's INFO 273 on private credit funds sets out the specific risks investors should consider7:

  • Originator failure. The non-bank lender behind a facility could fail operationally. Bankruptcy-remote structures, step-in rights and cashflow control are designed to handle this.
  • Concentration in a single sector. If the underlying portfolio is heavily skewed to one borrower type (e.g. only consumer loans), a sector-wide downturn affects everything. The Fund mitigates this by lending across multiple sectors and types of lenders.
  • Liquidity in stress. Redemptions are subject to available cash. In a stressed market, the redemption queue can lengthen.
  • Asset valuation. Unlike listed bonds, private credit is held at amortised cost under IFRS 98. Marked-to-market volatility is low, but model risk in valuation is real.

The bottom line

Asset-backed private credit is the structural cousin of bank lending. The Fund occupies the same senior secured position banks have held for decades, in a sector that has structurally moved out of bank balance sheets. Done well, with the right discipline and structure, it can deliver regular income with the protection of senior secured asset-backed lending.

Sources & references

  1. International Monetary Fund, Global Financial Stability Report, April 2024, Chapter 2: The Rise and Risks of Private Credit. imf.org
  2. Bank for International Settlements, Quarterly Review, March 2024, Private credit: the new shadow banking. bis.org
  3. Personal Property Securities Act 2009 (Cth), Federal Register of Legislation. legislation.gov.au
  4. Reserve Bank of Australia, Financial Stability Review, non-bank lending sector. rba.gov.au/publications/fsr
  5. Basel Committee on Banking Supervision, Basel II Securitisation Framework. bis.org/publ/bcbs128
  6. Cliffwater Direct Lending Index (CDLI), 20-year history. cliffwaterdirectlendingindex.com
  7. ASIC, Information Sheet 273, Warnings on private credit funds. asic.gov.au/info-273
  8. IFRS Foundation, IFRS 9 Financial Instruments. ifrs.org
  9. Eldium Income Fund Class A Monthly Report, April 2026.
  10. Corporations Act 2001 (Cth), section 761G, meaning of "retail client" and "wholesale client". legislation.gov.au

This article is general information only. It does not take into account your personal financial situation and is not financial advice. The Eldium Income Fund is open only to wholesale clients under section 761G of the Corporations Act 2001 (Cth).